Just a simple calc based on the companies latest numbers.
At current prices both KLL and SO4 have dropped off in terms of attractiveness, SO4 much more than KLL ofcourse, but KLL too blew out on OPEX and then proposed an illogical expansion.
Overall Assumptions:
- AUD at 0.73 long term.
- SOP Price Steady State of 550. Not a fan of using peak prices.
SO4 Assumptions:
- 600 million share raise at SO4 to fund additional capex, pay of debt coupons until they ramp up.
- 20% risk on production at SO4 seeing they can't even get to half the rate right now.
- I've assumed 50% of Cost/Tonne will still apply even if SO4 are able to cost cuts for their lowered production.
- 5% Royalty Rate + 1.5% Native/Land Royalties
- Depreciated plant over 20 years (not a 100% on tax guidelines on this)
KLL Assumptions:
- 5% WA Royalty + 1.9% Owners + 1.1% Native Royalty
- Cost Per Tonne of $300 US (Assume 10% Up on their 120ktpa study, unfortunately KLL have sidestepped giving updated Opex for their 100ktpa base operation).
- Assume their cost increases are LOM (as per their own study), any reversal in haulage inflation is a benefit, but not counted on.
- Depreciated Plant over 20 years
- Assume they can reach 100% of their stated plant output, but not considering 100ktpa as guaranteed. Essentially 10% risk on production.
I'm only guessing on SO4 recapitalization details and have included a lot of risk on the production side. The 100M raise is only rumored as yet, could be much better (which would remove dilutive effect), or much worse.
Without the mooted 20ktpa expansion, will take KLL about 20 years to fully pay of the plant (keep in mind no company does this, more likely they keep debt steady with some expansions) vs pretty much never for SO4 without a cap raise, or reaching 100% production.
The cost actual we're seeing from SO4 and KLL now, makes AMN and APC's optimistic cash costs a bit suspect too, and until either SO4 and KLL come through I suspect it will be hard for anyone in the SOP space to get much progress on Financing besides maybe NAIF/Gov avenues (with a lot of DD).
I think KLL is modestly undervalued probably valuing it closer to 26-30c as it was earlier this year, but the risk of the board proposed Capex and associated raising is clearly weighing the price. This is just considering the model doesn't take into account for KLL Carnegie and the EcoMag venture which will be given some value in the SP.
Perhaps BCI, but their SOP side is the least certain seeing they'd be a trailblazer for Sea derived SOP, and their funding will be anchored by the salt business so they probably will, but not on the merit of the SOP part.
KLL vs KLL 120 (assume 200 million shares @ 0.15 to cover 66% of Capex, 15 mil extra debt).
Keen to hear any Feedback, points I may have missed, or improvements to the model.
@sevo keen for your thoughts too.
